Buying a Home in the Current Economy

Reader Question: Given the very recent economic events, would you advise purchasing a home at this time or waiting?

From a buyer's perspective, there's really an upside and a downside to the current economic "crisis." So let's take a look at both sides:

The downside is that it's harder to qualify for a mortgage loan these days. You need a higher credit score and a more favorable debt-to-income ratio, among other things. This is especially a problem for people with past financial problems, bankruptcies, poor credit and such. Of course, if you have good credit, this might not be an issue at all.

The upside is that home prices have dropped considerably in most areas, when comparing current data to the prices from a couple years ago. Bad for sellers ... good for buyers.

The question for home buyers (and even for sellers) is, how much further will prices drop? Or will they start to rebound sometime soon? Sure, you could save money on a home right now. But how do you know the value of the property won't continue to drop after you buy it, due to continue weakening of the economy? The answer, of course, is that you don't know. That's the question mark that always applies to real estate purchases.

So to revisit the question at hand, it's hard for me to advise for or against buying a home in the current market. I think in some cases it makes sense, while in other cases it does not. For example, a first-time home buyer with great credit who plans to stay in the home for many years ... that would be a case where buying a home might make a lot of sense in the current economy.

But somebody with bad credit, or somebody who plans to turn around and sell within a few years, should probably avoid a home purchase at this time. It's something to be carefully considered on a case-by-case basis.

Hope that helps. Good luck!